Oklahoma State Representative Mike Reynolds contacted Herring Bank in Amarillo, TX, after Herring took over First State Bank Altus, where he learned $643 million of the, previously reported, unused loan commitments scheme First State Bank Altus was operating in December 2005 was divvied up in the following manner. Only $1 of each loan was ever advanced.

Fake loans used to file false tax credit claims

Fake loan amounts

Altus Venture Capital Fund V (AVCF V)

$189 million

Altus Venture Capital Fund IV (AVCF IV)

$85 million

Altus Venture Capital Fund III (AVCF III)

$14.5 million

Oklahoma Industrial Venture Capital Company (OIVCC) *

$218 million

Affinity Ventures Capital Company

$67 million

Affinity Ventures Capital Fund I

$69 million

Total

$643 million

* OIVCC is one of the Altus Venture group of LLCs

Paul Doughty, then president, First State Bank Altus, issued the six loans, totaling $643 million, to investment firms he managed, then used the loans to claim as investments. The Oklahoma Tax Commission authorized the tax credits, in spite the amounts claimed where beyond ridiculous. In addition, it had been brought to the attention of OTC's Tony Mastin, the size of the claims and the way the loans were claimed to be used would not qualify for tax credits. QMA which only received $32 million would have had to qualify for it type certificate and produce nearly 2,000 airplanes within less than 2 years. Not only a physical impossibility, but any reasonable person would have question the potential market for such a huge number. A number larger than all the training planes, the target market, of this size airplane built in the last ???? years

Oklahoma lawmakers insured the public could never learn the cost, who or how the venture capital tax credits where being used. We did learn $189 million (AVCF V) was the fake loan used to inflate the $32 million invested in Quartz Mountain Aerospace to falsely claim $221 million was invested; and receive $66 million in tax credits, for 2005. Altus Ventures filed another $200 million false claim, based entirely on a fake loan (without investing any money) in 2006 and received another $60 million in tax credits.

These fake loans provide the so called borrowers with legitimate looking loan documents from a federally regulated bank. The tax commission then accepted these fake documents, wrapped in layers of red flags, at face value, without questioning.

In the case of Altus Ventures and QMA the story about using the $189 million loan was exposed and well covered in the media. Tony Mastin, the tax commission administrator, was interviewed about this very story. Not only did the tax commission not go back and examine the first claim it allowed Altus Venture's second $200 million claim, wrapped in even more red flags, to again go unchallenged. The most obvious is the tax commission having a heads up. Another was the size of the claimed investments. We can see that there was far more than the $66 million in tax credit claims than state officials admitted in early 2006. Potentially as much as $193 million defrauded tax credits for 2005.

This story is more than the $100s million in tax credit fraud. This story is about high level state officials, willing to abuse their positions of trust and authority, given to protect the public interest; to instead aid and protect fraud against the public.

The only thing worse is the pathetic indifferences exhibited by what few, if any, quasi honest state officials and lawmakers; and the general public who prefer to bury their heads in the sands of denial, rather than deal with the unpleasant.